A&B sells 41,000 acres of ag land

$262 million sale of former sugar fields involves California farm company, pension group from Canada

Chris Sugidono

Staff Writer

csugidono@mauinews.com

A rainbow glows over Pukalani on Wednesday afternoon as viewed from the central valley, looking over a wide swath of former sugar cane land. Alexander & Baldwin sold 41,000 acres of former sugar fields to a joint venture that includes a California agricultural company and a Canadian pension fund investment group. The Maui News / MATTHEW THAYER photo

Alexander & Baldwin closed one of the largest land sales in state history Thursday, selling its 41,000 acres of former sugar fields to a joint venture comprised of a California-based agricultural company and a Canadian pension fund investment group “committed to sustainable agriculture” and producing “high-quality, non-GMO foods.”

The $262 million deal with Mahi Pono, which consists of Pomona Farming LLC and Public Sector Pension Investment Board, one of Canada’s largest pension investment managers, ends A&B’s ownership of the old sugar cane lands that the company has held for nearly 150 years. Its subsidiary, Hawaiian Commercial & Sugar Co., shut down operations at the end of 2016.

“This is the most significant land transaction in the whole state over the last 150 years,” Wailuku land broker Michael Spalding said Thursday. “There’s been a lot of piecemeal transactions over the years, but nothing anywhere close to this.”

The sale also includes Mahi Pono assuming all diversified agricultural leases previously entered into by A&B, and for A&B and Mahi Pono to partner in ownership and management of East Maui Irrigation Co., which manages A&B’s water diversion system.

Mahi Pono said it plans to produce high-quality, non-genetically modified food for local consumption with export potential; provide local partners with resources, such as farming expertise, equipment and farming capital; offer water in an agricultural park for use by small, local farmers; and create jobs for local residents with job training and educational programs for employees. The new owners said they have no plans to convert any of the land to nonagricultural uses.

A&B said Mahi Pono’s farm plan currently calls for cultivating a broad range of food crops for local consumption and export, including coffee, various fruit and vegetable crops and an expansion of Kulolio Ranch.

The 41,000 acres in the sale includes the 36,000 acres used for sugar cane with the other 5,000 acres encompassing roads, irrigation infrastructure, gulches and other areas, A&B spokesman Darren Pai said.

“Agriculture was A&B’s legacy and one we are proud of,” Pai said. “Since closing sugar, our goal has always been to find a third party to help us transition these lands to diversified agriculture.

“Mahi Pono is solely focused on farming, experienced and uniquely qualified to make the investments needed to ensure farming remains active in Central Maui for generations to come.”

Pai said the goal moving forward is to reinvest the proceeds of the sale back into Hawaii and to look for commercial real estate opportunities across the state.

He said the company believes it received “fair value for the bulk sale of these lands.” Spalding, who has been doing real estate on Maui for over 40 years, concurred.

Spalding said A&B’s agriculture land holdings were amassed over the years by Claus Spreckels, Samuel Thomas Alexander and Henry Perrine Baldwin in deals with Hawaii’s monarchs.

“They clawed this property together and given incentives to develop an agricultural base,” he said.

To put the scale of the 41,000 acre sale into perspective, Spalding said it essentially covers the entire Central Valley, with “every bit of land cultivated in sugar” from Maliko Gulch to Kihei.

“It would take you six hours to walk from one edge of the property to the other,” he said. “It’s a vast amount of land and hugely significant because it has water entitlements supporting land for the past 150 years. It also has great sun potential so it’s great for a variety of crops with water, and it’s accessible to transportation for export.”

A key advantage of the property is that agriculture equipment does not need to traverse government roads; A&B has an extensive internal road network. Old Tournahaulers avoided having to be street legal.

“You couldn’t run those on a highway,” he said. “A lot of plantations in Hawaii sold because operating costs were too high. One reason is they had to have street legal trucks transporting to factories. That’s another huge factor for efficiency of operations.”

While Mahi Pono and A&B outlined general plans for the 41,000 acres, the new owners did not offer detailed plans Thursday.

Mahi Pono President Ann Chin said Thursday in an emailed response to questions from The Maui News that the partnership will “continue to evaluate the situation and engage the community to ensure that appropriate input is provided before proceeding.”

She said that a general plan for diversified agriculture does exist, but Mahi Pono is open to “augmenting” it based on feedback from local community and farming leaders.

“With our purchase of this fertile land, we want to help ensure that Maui’s residents can produce agricultural products for future generations,” Chin said in a news release. “We want to expand Maui’s thriving and diversified agriculture industry. As we develop our plans, we will work closely with local stakeholders, including the agricultural community, our neighbors, government officials, civic leaders and the local community.

“Mahi Pono is committed to sustainable agriculture. We will be stewards of the land, and responsible users and protectors of Hawaii’s natural resources and environment.”

Environmental groups were wary of the implications of the sale and questioned whether A&B should have broached the possibility of a sale last month to the state Board of Land and Natural Resources, which was taking up leases for water drawn by A&B from state land.

At the hearing, the company was granted a time extension for water-use permits to take water from streams on state lands in East Maui for its ditch, tunnel and siphon system. In addition, the Sierra Club of Hawaii was later denied a contested case hearing on the decision.

The diversion of water from East Maui has been a flashpoint between A&B and East Maui taro growers, Hawaiian practitioners and conservation groups, who say the diversion system has dried up streams.

“We are a little confused because we brought up the fact that it was very likely these A&B lands were going to be sold to somebody else,” Sierra Club Vice Chairwoman and Huelo resident Lucienne de Naie said. “They never mentioned sale to the board. I was in the room.

“The word was lease. Lease the entire footprint. That’s one reason Sierra Club thought that this board should have more information before they decide.”

The Sierra Club also argued that A&B failed to monitor fish migration up streams or speak with residents living along the 50 or so streams covered in the state leases, de Naie said.

“There was a lot of additional information that would’ve improved the decision-making,” she said. “There was a big information gap.”

Despite her concerns, de Naie was encouraged by the new ownership’s statements on dialogue with the community. She said she hopes officials reach out to local farmers’ groups, the Aha Moku Council and others.

“We’re optimistic that it’s not just window dressing,” she said. “Perhaps the new owner will be really interested in working to address some of these issues that have existed 50, 60, 70 years unresolved. We fully believe there’s enough water to share, but there needs to be the right type of water use and management.”

Albert Perez, executive director of Maui Tomorrow Foundation, said he looks forward to working with the new owners and encouraged them to adopt regenerative agricultural methods, which use much less water. He said the method will leave more water for kalo farming, native stream life and other instream public trust uses.

Spalding thinks A&B had “no intention of selling the property,” but saw the deal as a “win-win opportunity.”

“They saw they didn’t have the skill sets or patient money to sit around and do a long term ag venture,” he said. “They already had to close HC&S, and I don’t think they had the appetite to start another one.”

A&B President and CEO Chris Benjamin reflected on the closure of HC&S, the last surviving sugar company in Hawaii, in his statement on the sale.

“A&B’s commitment, when we made the difficult decision to close our sugar operations, was to team up with qualified farmers and transition these lands to a diversified agriculture model,” he said. “We acknowledged that this transition would take time, but could support the important goals of food and energy self-sufficiency for Hawaii, preserve productive agricultural lands, and stimulate new economic activity on Maui and in the state.

“In Mahi Pono, we have found a unique partner with proven farming expertise, established marketing channels, strong financial resources, and a long-term perspective. Most importantly, they share our vision of seeing farming flourish across Central Maui for generations to come.”

While it was difficult for A&B to part with its long-held sugar lands, Benjamin said the company believes “the most important thing is that they remain in active agriculture — to help feed our local communities, support our local farmers and provide new economic activity and jobs for Maui and the state.”

Mahi Pono has the expertise and capital “to make diversified agriculture a reality in Central Maui” and could only make investments if it owned the lands, Benjamin said.

“We considered many alternatives and believe this is the best path forward toward keeping these lands in agriculture and sustaining farming on Maui once again,” he said.

Former Lt. Gov. and Maui state Sen. Shan Tsutsui is a Mahi Pono adviser.

“This agreement significantly increases the potential for a meaningful advancement in food security and a renewed pledge to growing agriculture on Maui, topics that continue to resonate with me since I initiated the ‘Aina Pono Hawai’i State Farm-to-School Program in 2015,” he said. “It’s my hope that the fruits of this agreement will have a lasting impact on our keiki, the agriculture industry, and the state’s ability to become truly sustainable for many years to come.”

Maui County officials and state lawmakers weighed in on the land sale and were generally supportive of the deal.

“It is vital that we recognize these decisions as more than economic; they have a fundamental impact on the quality of life on our island and across the state,” Senate Majority Leader J. Kalani English, whose district includes East Maui, said in a statement. “We look forward to working with Mahi Pono as good neighbors and hope to share a long and serious commitment to Maui’s best future.”

State Rep. Lynn DeCoite, Hawaii’s only farmer serving as a lawmaker at the state Capitol, said she hopes the new ownership will consider existing mom and pop farms and not “flood the market and wipe them out.” She also echoed concerns about EMI and the return of water to streams and residents of East Maui.

“It’s always good to have someone growing food,” DeCoite said. “I would definitely love to sit down and have a conversation with them, but your actions speak louder than your words.”

In its news release, Pomona Farming said that it has “significant experience” farming diverse agricultural crops and managing cattle operations on more than 100,000 acres. The company also is focused purely on agriculture and has a track record of making long-term investments in farming projects.

The Public Sector Pension Investment Board reported net assets of $158.9 billion in Canadian dollars as of Sept. 30. It manages a diversified global portfolio composed of investments in public financial markets, private equity, real estate, infrastructure, natural resources and private debt, according to Mahi Pono’s news release.

Established in 1999, PSP Investments manages net contributions to the pension funds of the federal Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force. Headquartered in Ottawa, the investment group has its principal business office in Montreal and offices in New York and London.